The document discusses how to sell a company through a 10 step process. It outlines reasons for selling including wealth creation, survival, retirement, and personal reasons. Financial indicators like EBITDA, revenues, profits, and debts are used to determine a company's value, along with non-financial factors. Risks can lower valuation, so honesty and proper management are important. The steps include deciding to sell, selecting consultants, defining the desired buyer, creating marketing materials, contacting buyers, negotiations, due diligence, agreements, and final sale. Valuations are typically based on EBITDA multiples of 5-10 times, depending on growth and risks. The document is authored by Darko Butina from investment company Netcetera

1. How to sell your company?
Darko Butina, June, 2016

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The stuff that dreams are made off…

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The stuff that dreams are made off…

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Why sell?
1. Wealth creation
2. Survival
3. Moving on
4. Retirement
5. Other personal reasons

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Whatever the reason is, it always comes down to…

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Financial indicators determine value of the company
• EBITDA – potential free cash-flow the company can generate
• Revenues – growth
• Profit – profitability over time
• Liquidity and cash-flow – are you able to regularly pay your dues and how does
your liquidity change over time
• Net debt – short-term and long-term debts minus cash and other very liquid assets
(including really short-term claims)

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Non-financial indicators help drive valuation
• Number of customers - growth
• Churn rate – % of customers leaving the company in a certain period
• Average order value
• Number of visits
• Number of visitors
and lots of others…

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Risk lowers valuation
• Trust – always be honest and transparent
• Properly manage the company – business fundamentals
• Agreements (properly done)
• Compliance
• Taxes
• REMEMBER! – investors risk more – they give you the money today and hope for
return in the future

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Before looking for buyer
• Growth – „If the company does not grow, it is dying.“
• Clearly defined (and written) plans for the future
• Profitable business
• Properly managed business (this is number one reason for failure at DD):
• All contracts are signed
• Properly prepared financial accounts
• Regular fulfilment of company’s obligations (paying all your debts when due)
• Regular collection of claims
• All legal obligations fulfilled

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10 step process of selling the company
1. Decision of owners to receive investment / sell the company
2. Selecting consultants
3. Define what kind of investor / buyer company wants
4. Preparation of marketing materials
5. Contacting potential investors / buyers
6. Negotiation
7. Term Sheet
8. Due diligence
9. Agreements
10.Sale of the company

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Decision of owners to sell the company

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Selecting consultants

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Define what kind of buyer the company wants

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Preparation of marketing materials

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Contacting potential investors / buyers

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Negotiation

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Term sheet

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Due diligence

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Agreements

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Sale of the company

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Practical tips for the whole process of selling your
company
1. Properly manage your company from day 1
2. Keep focus on business
3. Owners should be in sync
4. Use consultants
5. Invest time and effort in business plan and financials preparation
6. Be consistent – build trust
7. It is always about finances

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How to get the company through the process without
consequences
• Keep focus on the business despite all the efforts connected with acquiring investor
• Appropriate communication with everybody (owners, co-workers, potential partners,
own consultants, partner‘s consultants etc.)
• Get the right consultants – if you manage the process on your own as CEO, expect
that you will have to work at 150%, not only 110% or only 120%
• Again, keep the focus on regular business – otherwise the deal will fail
• During the process of acquiring investor you will accept decisions, which will not be
always clear to other employees – be extremely sensitive to reactions of employees
– company is worth nothing without its employees

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What kind of valuation can you expect?
• Start-ups often dream of too high valuations (based also on real data from markets
Netcetera is active in as investor)
• Valuations of US start-ups in media are exception, not the rule
• The most simple formula for valuation of a company is EBITDA times certain
multiple minus net debt
• Multiples for mature companies are in general between 5 and 10 (depending on the
industry etc.) – higher multiples are almost everywhere an exception and not the
norm
• Again, valuations of US start-ups in media are exception, not the rule
• Growth and in certain cases also market share influence valuation the most
besides EBITDA
• Any kind of higher risk for the buyer (or investor) will lower valuation – loss, too
high liabilities, restricted warranties and reservations, casual management of
business etc.

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About Netcetera and myself
• Netcetera:
• 20 years in the making – first online pizza order in Switzerland in January 1996
• One of top SW companies in Switzerland (350+ employees) – several companies are part of
Netcetera Group (D1 Solutions, Braingroup etc.)
• Switzerland, Liechtenstein, Macedonia, United Arab Emirates, Germany
• Fintech, connected health, transport tech, digital enterprise, media and entertainment, law
enforcement
• Actively investing in promising start-ups based on SW / web technologies
• Darko Butina:
• Chief Investment Officer, Netcetera
• Lead several companies from different industries (from systems integration, web media and
marketing research to e-commerce, management consulting, production and utilities); from
start-ups to SMEs and to corporates; from 0 CHF revenues to over 500.000.000 CHF revenues
• Lead biggest Slovenian e-commerce player Mimovrste through turn around, its first investment
round (several million EUR) and through sale to leading e-commerce group (Netretail / Naspers)
– largest exit of a start-up in Slovenia and region to date
• Active angel investor (Serbia, Switzerland, UK, Slovenia)

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Is Netcetera the right partner for you and your start-up?
Yes, if…

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What are we looking for in start-ups we invest in?
• Team – known and fully dedicated
• World-class idea and global ambition
• MVP – preferably with first paying customers
• Geography – as in where the team operates from (Switzerland, Macedonia, Serbia,
Croatia, Slovenia, Germany)
• Industry – anything built on SW/web technologies (we can help most in industries
we are already in, but we are not limited by these industries)
• Biz plan with financials needs to be properly prepared
• Biz plan – can be in business model canvas form – accompanied by planned
activities and milestones
• Financials – P&L and balance sheet – accompanied by listed assumptions

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What can start-ups expect from us?
• Active investor – we will not do your work, but we will be active, share our
experience and knowledge and assist wherever possible (in case of more investors,
we prefer to act as lead investor)
• We are not pure financial investor – and we do not want to be
• Significant and proven managerial, entrepreneurial and technical expertise
• Understanding and know-how:
• We are and have been entrepreneurs and managers
• We have successfully raised funds
• We have experienced failure
• We have built, turned around and successfully sold companies
• We invest up to 200k CHF on our own – we also have (and are expanding) network
of partners with which we can invest also more (up to 1M CHF and more)

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QUESTIONS?
e: darko.butina@netcetera.com
t: @TheDare
l: http://si.linkedin.com/in/darkobutina/